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By Anant Chandak
BENGALURU (Reuters) - The rapid expansion in India's dominant services sector cooled slightly in March amid softer demand, despite firms raising prices at the lowest rate in three-and-a-half-years, according to a survey that also showed a deceleration in job creation.
The HSBC final India Services Purchasing Managers' Index, compiled by S&P Global, fell to 58.5 last month from 59.0 in February, but was higher than a preliminary estimate that showed a fall to 57.7.
However, it remained comfortably ahead of the 50-mark separating contraction from growth.
"Domestic and international demand remained fairly buoyant, despite being sequentially a tick lower than the month before," noted Pranjul Bhandari, chief India economist at HSBC.
Domestic demand remained a key driver, with new business showing solid growth, albeit at a less intense pace compared to February.
Foreign demand softened and international orders rose at the slowest pace in 15 months, signaling potential vulnerabilities to global economic shifts including from U.S. President Donald Trump's recently announced tariff measures.
Inflationary pressures subsided with input cost inflation rising at its slowest pace in five months. That, along with intense competition, led to the weakest increase in output prices since September 2021.
The competitive landscape weighed on business sentiment for the coming year and the future activity index cooled to a seven-month low, affecting employment growth. The pace of hiring additional staff slowed to the lowest in just under a year.
"Looking ahead, business sentiment remains generally positive, but intensifying competition presents a significant challenge to many survey participants," added Bhandari.
The HSBC India Composite PMI, which included robust manufacturing growth, rose to a seven-month high of 59.5 in March from February's 58.8, reflecting stronger overall private sector growth.
Manufacturing growth outpaced services, but both sectors saw moderating employment growth and business confidence.
Weaker inflation and poor business confidence could compel the Reserve Bank of India to cut interest rates again, by 25 basis points on April 9, to support an economy which likely grew at its slowest rate in four years last fiscal year.
(Reporting by Anant Chandak; Editing by Kim Coghill)
